There are two types of consumers in Melbourne: students and non-students. The student population is 10, and each student’s demand of printing paper is Q=1−p, for p<1.The non-student population is 40, and each non-student’s demand of printing paper is Q=3−p, for p<3. Suppose OfficeMax is the only seller of printing paper in Melbourne. Assume zero production cost. Suppose OfficeMax offers a student discount, $1, so students only pay $0.50 and non-students pay the full price, $1.50. What is the deadweight loss in this situation?
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There are two types of consumers in Melbourne: students and non-students. The student population is 10, and each student’s
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- There are two types of consumers in Melbourne: students and non-students. The student population is 10, and each student’s demand of printing paper is Q=1−P, for P<1.The non-student population is 40, and each non-student’s demand of printing paper is Q=3−P, for P<3. Suppose OfficeMax is the only seller of printing paper in Melbourne. Assume zero production cost. Suppose OfficeMax cannot offer student discounts, and every customer has to pay the same price P. Derive the aggregate demand curve (for both students and non-students), and illustrate it in a diagram.You are the manager of a golf course. For simplicity assume that you only have two potential customers – a high demand customer whose inverse demand for golf services is given by P = 10 – 0.5Q and a low demand customer whose inverse demand for golf services is given by P = 8 – 0.5Q. Suppose the marginal cost to the golf course of each round of golf is zero.Suppose you have to charge both players the same two-part pricing strategy. Which of the following pricing strategies will yield the highest profit for you? A. Charge a fixed fee of €100 and a per unit fee of zero B. Charge a fixed fee of €64 and a per unit fee of zero C. Charge a fixed fee of €64 and a per unit fee of €4 D. Charge a fixed fee of €128 and a fixed fee of zero.Rosario has to finish her dissertation within 10 days, that is, at time t = 1, t = 2, ..., or t = 10. It takes one day to finish the dissertation, and on the day Rosario does so, she incurs an instantaneous disutility cost equivalent to $10. Rosario is a hyperbolic discounter with β = 0.85 and δ = 1. Her (instantaneous) utility function is u(x) = x.(a) Suppose the university has a system in which it charges Rosario $1 in fees for every day she does not finish her dissertation (paid each day that it is incurred). E.g., finishing on day 2 incurs a cost of $1 paid on day 1. When does Rosario finish if she is naive? How much does she pay in penalties? (Hint, past penalties are sunk, e.g., from the perspective of t = 2 self, any penalties paid in t = 1 are sunk, and do not factor into decisions or utilities going forward.)(b) Still in the $1/day system, when does Rosario finish if she is sophisticated?(c) Now suppose that the university has a deadline system: Rosario incurs a penalty of…
- To join the Quiet Reading Society, members pay a fixed annual fee of F, and then they can read any number of books at an extra charge P per book. Each member’s willingness to pay for Q books is P = 100 - 5Q. (Here, Q refers to the number of books a member reads completely, but partial quantities are also possible.) The club has fixed costs, but incurs no additional cost when a member checks out a book to read. What does the optimal two-part pricing scheme look like?A. It costs nothing to join the club, and then books can be read for $50 each.B. It costs $100 to join the club, and then books can be read for $5 each.C. It costs $500 to join the club, and then books can be read for $10 each.D. It costs $1,000 to join the club, and then books can be read for free.There are two types of consumers in Melbourne: students and non-students. The student population is 10, and each student’s demand of printing paper is Q=1−P, for P<1.The non-student population is 40, and each non-student’s demand of printing paper is Q=3−P, for P<3. Suppose OfficeMax is the only seller of printing paper in Melbourne. Assume zero production cost. Given the optimal price is 1.30, compute the consumer surplus for students, consumer surplus for non-students, and producer surplus.If consumers can easily switch to a close substitue when the price of a good increases, demand for that good is likely to be:
- A supplier is selling tomatoes in two cities, Antalya and Istanbul. It costs him 1 TRY per kg of tomatoes delivered in each city. Let p1 be the price of a kg of tomatoes in Antalya and p2 be the price of a kg tomatoes in Istanbul. The price-response curves in each city: Antalya: d1(p1) = 500 - 100p1 Istanbul: d2(p2) = 1,200 - 200p2 Assuming the supplier can charge any price he likes, what prices should be charged for a kg of tomatoes in Antalya and Istanbul to maximize total contribution? What are the corresponding demands, revenues, and total contributions in each city? What is the total demand, total revenue, and total contribution over the two cities?The pricing model for iTunes has been to price songs individually. In contrast, Spotify opted to offer unlimited song playing for a monthly fee. True or False: Spotify's pricing model will likely yield more profit if the value that individuals attach to songs varies greatly across songs and across different people. True FalseThe information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero. 1. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell, how many premium digital channel cable TV subscriptions will be sold altogether and what price will be charged when this market reaches a Nash equilibrium? 2. Under the conditions given in Question #3 of this problem, how much profit will each firm earn when this market reaches a Nash equilibrium? 3. What is the socially efficient level of digital premium channel subscriptions for this market and at what…
- Suppose Mattel, the producer of Barbie dolls and accessories (sold separately), has two types of consumers who purchase its dolls: low-value consumers and high-value consumers. Each of the low-value consumers tends to purchase one doll and one accessory, with a total willingness to pay of $44. Each of the high-value consumers buys one doll and two accessories and is willing to pay $82 in total. Mattel is currently considering two pricing strategies: • Strategy 1: Sell each doll for $22 and each accessory for $22 • Strategy 2: Sell each doll for $6 and each accessory for $38 In the following table, indicate the revenue for a low-value and a high-value customer under strategy 1 and strategy 2. Then, assuming each strategy is applied to one low-value and one high-value customer, indicate the total revenue for each strategy. Revenue from Low-Value Customers Revenue from High-Value Customers Total Revenue from Strategy $44 Value, 1 Accessory $82 Value, 2…Bluth’s Bananas is considering expanding its retail operations for its one-of-a-kind frozen banana stands on Jones Beach, which is 10 kilometers long. Bluth’s Bananas estimates that the typical day has 2,000 visitors to the beach, spread uniformly, and that each will demand a single frozen banana provided the price plus any disutility of traveling to a stand does not exceed $6. To visit a stand a beach goer incurs a disutility of $0.50 for each 1/4 kilometer they have to walk to reach a stand. Each Bluth Banana costs $0.75 to make and each stand requires an operating fee to be paid to the city of $50 per day. Determine the equilibrium number of stands Bluth’s Bananas should operate on the beach given it is not in competition with any other firm. Determine the profit maximizing price for the bananas and calculate the profit realized by BB in equilibrium.There are two types of consumers in Melbourne: students and non-students. The student population is 10, and each student’s demand of printing paper is Q=1−?, for ?<1.The non-student population is 40, and each non-student’sdemand of printing paper is Q=3−?, for ?<3. Suppose OfficeMax is the only seller of printing paper in Melbourne. Assume zero production cost. Suppose OfficeMax offers a student discount, d, so students only pay d*p and non-students pay the full price, p. What are the profit maximizing price and discount d?